US using "all available tools" to respond to China's unfair trade practices

The Trump administration is using "all available tools" to respond to the serious challenges being posed by China on trade, an official report has said, asserting that the US' approach towards Beijing's "unfair" trade practices is more aggressive than ever in the past. In a report to the Congress on China's WTO compliance, US Trade Representatives (USTR) alleged that despite repeated commitments to refrain from forcible technology transfer from US companies, China continues to do so through market access restrictions, the "abuse of administrative processes, licensing regulations, asset purchases, and cyber and physical theft."

"Out of necessity, the US is now using all available tools – including domestic trade remedies, bilateral negotiations, WTO litigation and strategic engagement with like-minded trading partners – to respond to the unique and very serious challenges presented by China,” it said. Running into more than 180 pages, the report said America’s approach to China is more aggressive than in the past, but the goal for the US remains the same, which is seeking a trade relationship with China that is fair, reciprocal and balanced.

It said China committed to open the electronic payment services market in 2006. "Today, the reality remains that no foreign electronic payment services companies conduct business in China’s domestic market,” USTR rued. USTR alleged that China’s use of export and import substitution subsidies has been ubiquitous throughout the past two decades in sectors as diverse as automobiles, textiles, advanced materials, medical products and agriculture, despite explicit prohibitions in the WTO Agreement.

China has repeatedly committed to review applications of agricultural biotechnology products in a timely, ongoing and science-based manner. "However, the Chinese regulatory authorities continue to review applications slowly and without scientific rationale, while Chinese companies continue to build up their own capabilities in the area of agricultural biotechnology," it said. The report alleged that China has repeatedly deployed illegal export restraints, such as export quotas, export licensing, minimum export prices, export duties and other restrictions, on scores of raw material inputs, as determined in multiple WTO cases brought by the US and other WTO members.

Further, China has used these illegal export restraints to provide substantial cost advantages to a wide range of downstream producers in China at the expense of foreign producers, while creating pressure on foreign producers to move their operations, technologies and jobs to China, it said. The USTR told the Congress that any review of China's trade regime also shows that China’s regulatory system is so opaque that it is often difficult for US companies – or even the US government – to fully understand China’s legal requirements in a particular area of the economy.

This problem is exacerbated by China’s extremely poor record of adhering to its transparency obligations as a WTO member. These shortcomings create their own trade barriers and undermine the competiveness of China's trading partners, it said. As such, the report said, the US will defend US companies and workers from China's unfair trading practices and will seek to restore balance to the trade relationship between the US and China.

As part of these efforts, the US will take all appropriate actions to ensure that the costs of China's non-market economic system are borne by China, not by the US, it said. USTR alleged that one significant result of China’s non-market economic system is the creation of excess capacity – that is, capacity that would not persist if market forces were operating properly.

"Many WTO members, including Canada, Australia, India and the EU, have responded to the trade-distortive effects of China's excess capacity by imposing trade remedies such as anti-dumping and countervailing duties in response to petitions from their domestic industries,” USTR said. The report alleges that China has not transformed its economic system to embrace open, market-oriented principles, nor has it abandoned its state-led, mercantilist trade regime in favour of a cooperative approach that promotes a multilateral trading system that is more fair and more open.

“Nevertheless, China has used WTO membership to develop rapidly,” it said. As China’s role in global trade has grown, its nonmarket economic system and state-led, mercantilist trade regime increasingly have disrupted international trade to the detriment of the US and other WTO members, it said. Rather than allow this harm to continue, the US has pursued both bilateral and multilateral mechanisms in response, it added. The US and China have been locked in an escalating trade spat since early 2018, raising import tariffs on each other's goods.

Last year, Washington and Beijing imposed tariffs on more than USD 360 billion in two-way trade, after President Donald Trump initiated the trade war because of complaints over unfair trade practices. During a meeting in Argentina on the sidelines of the G-20 Summit, Trump and Chinese President Xi Jinping agreed to halt any further tariff increases for 90 days beginning January 1. The two countries hailed "progress" in talks held in Washington last week aimed at avoiding an escalation of the conflict. But if no deal is reached by March 1, US duty rates on USD 200 billion in Chinese goods are due to rise to 25 per cent from 10 per cent.

(With inputs from agencies.)